evian Replaces Coca-Cola With Red Bull

Courtesy of designtaxi.com

It appears that Coca-Cola and evian have both outgrown their distribution partnership.  Come July 2014, Coca-Cola will stop distributing evian waters (read the full story here).  Consequently around that same time, some U.S. cities may see evian being distributed off Red Bull delivery trucks (that story found here).  While Coca-Cola & evian describe the agreement’s termination as an opportunity to refocus on their core businesses, it may simply be Coca-Cola wanting to re-focus on their own water brand as smartwater continues to build sales.  With this adjusted partnership, who wins and who loses?  Coca-Cola, evian, or Red Bull?

It would seem that Coca-Cola is constantly looking at ways to ensure delivery truck space is stocked with as much Coca-Cola-owned refreshments as possible.  Coca-Cola appears to be re-evaluating all their distribution agreements in order to locate new growth opportunities.  It was only two years ago in 2012 that Coca-Cola ended a distribution agreement with Nestea to focus their attention on Fuze – which so far has left consumers upset since Nestea is not as broadly available.  Fuze also appears to have failed to expectations given consumers still prefer Nestea.  Has Coca-Cola been supporting Fuze with the appropriate level of marketing?  This indicates that while in-house products (Fuze, smartwater) may offer better profit margins, licensed products (Nestea, evian) may perform better given a stronger sales record (that was built with Coca-Cola’s distribution network).  Will Coca-Cola look to remove Monster Energy from their distribution infrastructure as well?  While smartwater may have stronger sales than Fuze, the question remains whether smartwater will be able to outperform evian.  If smartwater outsells evian, then Coca-Cola would have benefited from the distribution change-up.  The same logic would apply for all other products that Coca-Cola distributes.

For evian, this change comes at a time when the company is in the midst of introducing new product packaging.  The fact that the premium water brand needs to revitalize their packaging to stay competitive is disheartening.  This is a sign that evian must re-align some aspects of their product (this time it’s the packaging) in order to re-communicate the product benefits to the consumers.  With distribution changes occurring simultaneously, the impact is amplified and more detrimental. Consumers looking to repurchase evian waters may find fewer selection in addition to not recognizing the 14-year-old evian plastic bottle.  Retailers may be less confident in evian, observing so much change in such a short time.  However, Red Bull is a strong partner and is building up their own distribution network.  With the partnership agreement ending in July 2014, this still gives evian a little time to build more infrastructure to replace Coca-Cola’s footprint.  evian appears to be disadvantaged in this new arrangement, given the fragmented nature of their distribution system.  Even if evian could establish the same footprint as before, they still must compete against smartwater for shelf space given the opposite sales trends of these two premium water brands.  Still, evian is part of The Danone Group and would be able to leverage the strength of their yogurt distribution network.  Possibly weaker distribution, but evian should be none the worse off.

Courtesy of asiantrader.biz

For Red Bull, this is an opportunity for them to improve their business through new opportunities.  While their innovation track record outside of energy drinks has been poor, the sales of their energy drinks has been steady and growing.  The fact that the energy drink manufacturer has returned to their roots among product innovation, they have also been creative to find new revenue-growing opportunities.  This is where distribution becomes that great growth opportunity.  As they deliver energy drinks to their retail customers, they can now satisfy more of the retailer’s beverage needs by bringing them evian as well.  While evian is the first manufacturer to explore product delivery through Red Bull, there are other product manufacturers that may leverage Red Bull’s distribution infrastructure in the future.  If Red Bull can expertly manage the evian distribution relationship and help the premium water brand regain sales momentum, then Red Bull stands to have many other growth opportunities in the future.

It would appear that Red Bull and Coca-Cola have more upside than evian in this new arrangement, but upside nonetheless.  It would also be important for other beverage manufacturers to take notice of what is happening here.  Would evian be better off approaching Pepsi to see if they can leverage a partnership with them?  And if you’re Monster Energy, this offers short term gains with more truck space.  Question is, will Coca-Cola one day end their distribution agreement to focus on Nos and other Coca-Cola owned energy drinks?